The end of Free Banking in the UK - pre 2019?

One overlooked point from yesterday's Banking reform is that the funding requirements are changing for the UK banks. They have long pretended that the Universal Banking approach is what has allowed them to offer free Banking to UK customers.

Of course, the truth is somewhat opaque, but it is likely that the retail banks, which are in themselves profitable are able to make enough money from charges and the sales of ancillary products such as credit cards, insurance and mortgages to cover the costs of offering free current account banking.

However, the new regulations will indeed increase their cost of capital and so require profits to be found elsewhere - thus the sights are going to be firmly set on cutting free banking.

Sadly, this will be unpopular amongst customers - indeed this is the sole reason we still have this product in the UK. Now though the Banks are going to be able to blame the Government and new regulations, so it won't be their fault at all.

Therefore the end is in sight for free UK Banking on current accounts? But the new regulations won't be fully implemented until 2019 - so how long before the moves towards ending free banking start. I will be surprised if it still exists in 2015.

A way out of the UK commercial property banking mess?

At last a deal has been struck in the long running saga of RBS's Commercial Real Estate portfolio. The bank has created a debt fund of £1.6 billion in loans and sold a stake in this to Blackstone. This deal has been a long time in fruition and all over the papers for nearly a year.

Why all the fuss? Well the vehicle created allows RBS to make a manageable write-down on loans that are at 90% loan to value or more. These have been unsalebale in the market to date, leaving RBS and Lloyds with big headaches as they have truly huge commercial property portfolio's and little way to move them on and free up their balance sheets. Lloyds has recently done a deal with Grainger which is a different model, but crucially the property remains the banks.

Here there is a model for a new type of distribution, there are risk to Blackstone in taking these loans on but they can see the upside too and are getting a good price; this deal should work.

As such, it provides a new route to market which will free up the Real Estate market and allow a work-out of this challenging banking issue.

2009: Brown's Bank nationalisations

Some intriguing snippets of news are leaking out that make for grim reading for shareholders of UK bank stocks. last week the dreadful HBOS announced it losses on corporate loans were in the extreme zone. As such, an analyst has pointed out that the joint HBOS/Lloyds bank will be heavily loss making and is likely to be nationalised next year.

The government too has been making plans, Robert Peston has blogged on some of the key long-term changes being made, in addition I see that the IMF are also suggesting that Government's get more radical in their approach to the credit crisis.

If the Government wants banks to lend more, it will have to give them more money as they are not going into risky business in this environment. More money means either printing it or borrowing from future tax payments. Either way it will mean the Banks too have to give more of their capital to the Government and the taxpayers 'suffer.'

2009; Nationalised Banking, I hope Labour are honest enough to put it in their election manifesto...